CPI is a measure of inflation representing the average consumer's purchases, used to understand changes in the purchasing power and to guide economic policy.
The Consumer Price Index (CPI) is a measure of inflation calculated by U.S. government statisticians. It is based on the price level from a fixed basket of goods and services that represent the average consumer's purchases. This index serves as a key indicator of changes in the purchasing power of a nation's currency and influences both economic policy and decisions. Specifically, the CPI measures the average change over time in prices paid by urban consumers for a range of consumer goods and services, which is then used to assess inflation trends within the economy.
The option that correctly defines CPI among the given choices is: b. the CPI is a measure of the price level based on the consumption patterns of a typical consumer. It reflects how the cost of this basket has changed over time and is crucial for understanding economic health and guiding fiscal and monetary policies.